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David Cameron is at risk of demoralising British Muslims with his “misguided emphasis” on saying that some people in the community are quietly condoning Islamist extremism, according to a former cabinet colleague and Conservative party co-chair.

Lady Warsi has delivered a blistering critique of the government’s approach towards Britain’s Muslims, warning that failure to engage properly with communities across the UK has created a climate of suspicion and undermined the fight against extremism.

Two months after resigning over the government’s “morally indefensible” stance on Gaza, Lady Warsi has called on MPs to lead by example and recognise the state of Palestine in a potentially historic vote on Monday.

Sayeeda Warsi has attacked George Osborne for failing to raise enough concerns with Israel about its bombing of Gaza, and urged other ministers who are privately expressing concern about the crisis to speak out.

David Cameron was finding, if he did not know already, how hard a cabinet reshuffle can be as he failed to persuade Iain Duncan Smith to leave work and pensions to run the justice department, and he battled for hours, eventually successfully, to prise Lady Warsi from the Conservative chairmanship to a new post in the Foreign Office.

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David Cameron is at risk of demoralising British Muslims with his “misguided emphasis” on saying that some people in the community are quietly condoning Islamist extremism, according to a former cabinet colleague and Conservative party co-chair.

Lady Warsi has delivered a blistering critique of the government’s approach towards Britain’s Muslims, warning that failure to engage properly with communities across the UK has created a climate of suspicion and undermined the fight against extremism.